Meanwhile, experts say up to 30 percent of producers must restructure or face bankruptcy: File Image/PixaBay
The global social and economic lockdown mandated by government as a response to the coronavirus pandemic finally caused a historic knockout punch to oil prices on Monday: for the first time ever, the value of the May oil futures contract for West Texas Intermediate plummeted 300 percent to end at minus $37.63 per barrel.
However, Brent and the June contract for WTI on Monday both settled above $20 per barrel, which experts say is a better reflection of the reality in the oil market.
Of the discrepancy between the now-expired May contract and the June contract, Reuters Breakingview explained that "Buyers are so wary of taking delivery of crude amid what they see as a global oil glut and a storage crunch that they will only do so at murderously low prices."
Dan Yergin, vice chairman, IHS Markit
This will end and demand will come back
Stating the obvious, Francisco Blanch, global head of commodities at Bank of America, said, “The world has never come to a halt like it has in the past few weeks: 60 percent of oil demand comes from transportation, [and] gasoline sales are down more than 50 percent; flights around the world are down 80 or 90 percent.
"The collapse in consumption is mobility driven; that’s what makes this crisis different than the great Depression.”
Michael Bradley, managing director at Tudor Pickering Holt, said that fallout of the lockdowns combined with producers up until very recently pumping all-out will fundamentally change a good portion of the petroleum industry: “The quality names will survive; you probably have 25 or 30 percent of the industry that is going to have to be restructured or go bankrupt in the next nine to 12 months.”
With an eye to the future, Dan Yergin, vice chairman of IHS Markit, agreed that the situation is unprecedented, but he added that "This will end and demand will come back: a lot of it is up to public policy and a lot of it is up to the virus itself.”
On that score, amid mounting arguments that the COVID-19 models that led health officials to enact the lockdowns were dramatically flawed and China being hit with multi-trillion dollar lawsuits over its handling of the virus, pressure to re-open the economy in the U.S. is rapidly growing.
Georgia and Tennessee on Monday announced plans to reopen some businesses and wind down stay-at-home orders; this follows European nations including Italy and Germany re-opening their economies, albeit by degrees.
Also, lockdown orders in nearly two dozen states are set to expire by May 1, which is setting the stage for further conflict between citizenry who have taken to the streets en masse to demand the freedom to return to work and politicians claiming this will merely exacerbate the spread of the virus.
Meanwhile, a new study from Stanford University that tested samples from 3,330 people in California's Santa Clarita country found the virus was 50 to 85 times more common than official figures indicated; and while many media outlets spun this information to emphasize the concern of health officials, it fell upon The Irish Times to point out that instead of the U.S.’s coronavirus death rate being 4.1 percent as of last week, the Stanford findings show a death rate of just 0.12 percent to 0.2 percent.
The study's author, Jayanta Bhattacharya, said “It is absolutely critical that similar studies be done all around the country.”